Muskegon Heights’ financial emergency prompted the appointment of Emergency Financial Manager Donald Weatherspoon, who ordered the district to stop providing educational services at the end of the last school year and laid off most of its staff.

Weatherspoon chose Mosaica Education Inc. to operate the district's schools as charter schools so Muskegon Heights Public Schools could focus on paying off its debts, estimated at the time to be around $12.5 million.

The newest loan will be used to make payments to major creditors, including $1.4 million to the MESSA health insurance provider, $400,000 to Chartwells food service, and about $150,000 to Priority Health health insurer, Weatherspoon said. A couple hundred thousand dollars will be left in the loan fund for emergencies, he said.

“Every payment has to get approved by (the Michigan Department of) Treasury,” he said. “No money will be advanced to the district to just sit around. Those days are gone.”

The district has up to 30 years to pay off the loan, which carries an initial 2.35 percent interest rate.

Weatherspoon said the district will need another loan, noting that the district still needs to pay about $1 million to the Michigan Public School Employees Retirement System. He didn’t know when that loan would be pursued or for how much because, he said, vendors have asked – and some have agreed – to provide the district discounts on the amounts they are owed.

“All of these people have been waiting a long time for their money,” Weatherspoon said.

Loans are being paid back primarily with proceeds from the district’s 18-mill nonhomestead property tax, which voters approved last November. The tax is on second homes – including rental homes – and business property.

Any fluctuation in property values affects the amount of tax revenue the district can collect and use to pay off loans.

“The question is how long can you maintain that income flow when there are certain things going on in the community,” Weatherspoon said, declining to elaborate.

The school district also will use the $335,000 annual fee it receives
for authorizing the Mosaica-run charter school system to pay off its debts.

Securing the loan took longer than Weatherspoon had anticipated. He had predicted after the first loan was issued last August that the district would be getting another loan that fall.